Barclays Sees Positive Momentum Continuing In Capital Markets
August 03 2009 - 2:48PM
Dow Jones News
Sub-investment grade and merger and acquisition deals will
increase in the second half of the year, while the asset-backed
securities market is still seeking a bottom, the head of Barclays
PLC's (BCS) investment banking unit said Monday.
"The worst seems to be behind us," Jerry del Missier, president
of Barclays Capital, said Monday following the release of an
earnings report that showed a particularly strong performance for
the investment banking business. "The capital markets-related
crisis we are in is coming towards the end."
The Barclays executive remains cautiously optimistic on capital
markets activity. He said he believes equity and debt capital
markets are operating at sustainable levels "because they are
driven by underlying flows and demand for raising equity and debt
capital markets products, and a likely increase in M&A
activity."
The capital markets, which were hard hit by the credit crisis
last year, started to open up in the second quarter. As banks
reported stronger second-quarter results and capital markets
rebounded, the second half of the year is poised for further
growth.
"A lot of the momentum from the first quarter carried over into
the second quarter," only with "better quality underlying
businesses" because of the "reopening of a number of capital
markets," he said Monday in an interview with Dow Jones
Newswires.
In April, del Missier correctly predicted that equity and
fixed-income underwriting and merger and acquisition advice were
going to pick up at banks in the second quarter - it was a minority
view at the time.
Barclays reported early Monday that net profit in the first half
of the year rose 10% to GBP1.89 billion. The U.K. bank got a boost
from its purchase of Lehman Brother's North American operations
last September, which improved performance in Barclays Capital.
While some capital market activity will slow due to the coming
dog days of summer, the capital markets are "healthy," del Missier
said Monday.
M&A activity is set to increase, and the corporate sector
"is definitely looking to re-engage," he said.
Flows in fixed-income markets have fallen a little, he said, but
sub-investment grade activity should pick up. Unlike the
investment-grade market, the sub-investment-grade market hasn't yet
seen a rebound from the financial crisis. Now, though, as
confidence comes back to the market and more market participants
are willing to take risks again, they are looking at debt
opportunities again.
But challenges remain. Loan and structured credit losses haven't
run their course, he said.
"Asset-backed securities, whether it's commercial properties or
other loans receivable, are clearly not operating at full
capacity," he said.
The asset-backed securities market hasn't rebounded fully, and
"we need to see more clarity or consensus that asset prices have
bottomed before you see those markets come out of the depressed
state they have been in for a while now."
He said, "there is still not a lot of refinancing available for
those assets."
-By Jessica Papini, Dow Jones Newswires; 212-416-2172;
jessica.papini@dowjones.com
-By Matthias Rieker, Dow Jones Newswires; 212-416-2471;
matthias.rieker@dowjones.com